Student Blog: Big Tech and Financial Service – The Keep Big Tech out of Finance Act
by Daniel McCarthy, RBFL Student Editor
On July 15, 2019, the House Financial Services Committee introduced the “Keep Big Tech out of Finance” Bill. This Bill, if enacted, would have a few major impacts on the financial services industry. First, the Bill would prohibit technology companies that have an annual global revenue of over twenty-five billion dollars from either acting as a financial institution or being affiliated with a financial institution. Additionally, the Bill would ban technology companies of that size from offering or maintaining a marketplace, which acts as a stock exchange, thus effectively banning cryptocurrency products. The companies that would be most affected by this Bill are Amazon, Facebook, Google, Apple, and Microsoft. However, it should be noted that a number of notable FinTech companies, such as Robinhood, Coinbase, and SoFi would not be affected by this Bill because each of these companies’ global annual revenues are less than twenty-five billion dollars.
There appears to be a few key concerns that drove the House Financial Services Committee to introduce the Keep Big Tech Out of Finance Bill. The first concern is consumer protection, particularly misuse of consumer data, which is at the forefront of legislators’ minds following the recent issues with Facebook. Another concern with allowing Big Tech Companies into the financial sector is the potential negative impact on financial stability due to the Big Tech Companies having a lack of expertise in systematic risk analysis. The last major concern is that Big Tech Companies may actually have a negative impact on competition, as Big Tech companies may be able to use their existing customer base and access to existing and new capital to gain share and potentially push out large financial institutions from the sector.
On the other hand, there are also potential negative impacts from barring Big Tech Companies from entering the space. For example, prohibiting these companies’ entry may eliminate a number of improvements that these Big Tech Companies could potentially provide for consumers. Additionally, banning the Big Tech Companies from developing and offering cryptocurrency may inadvertently stop the development of a technology that can provide greater access to financial services to the underbanked.
While the current proposal is an all-or-nothing approach, there are a few potential options that are less restrictive, and still may alleviate some of the concerns. First, a governmental agency can be established to regulate how Big Tech Companies act in the financial sector, similar to how agencies like the SEC and FDIC regulate large financial institutions. Another potential solution is prohibiting Big Tech Companies from acting as independent financial organizations, but allowing them to partner with large financial institutions. These solutions may be more effective, as they would allow for consumers to benefit from potential innovations or improved offerings that Big Tech Companies may drive, while eliminating potential issues with consumer protection and financial stability.
Sources:
Pete Schroeder & Ismail Shakil,U.S. Proposes Barring Big Tech Companies from Offering Financial Services, Digital Currencies,Reuters (July 14, 2019), https://www.reuters.com/article/us-usa-cryptocurrency-bill/u-s-proposes-barring-big-tech-companies-from-offering-financial-services-digital-currencies-idUSKCN1U90NL[https://perma.cc/UBH6-WVFP].
Financial Stability Board, FinTech and Market Structure in Financial Services 1 (2019) (explaining FinTech firms are already in the market).
Keep Big Tech Out of Finance Act, H.R., 116thCong. (2019).
Fortune Global 500, Fortune (2019), https://fortune.com/global500/2019 [https://perma.cc/CT5W-TPHM].
Press Release, Federal Trade Commission, FTC Imposes $5 Billion Penalty and Sweeping New Privacy Restrictions on Facebook(July 24, 2019), https://www.ftc.gov/news-events/press-releases/2019/07/ftc-imposes-5-billion-penalty-sweeping-new-privacy-restrictions [https://perma.cc/YE8Q-FGFV].
Ron Shevlin, Amazon’s Impending Invasion of Banking, Forbes (July 8, 2019), https://www.forbes.com/sites/ronshevlin/2019/07/08/amazon-invasion/#59d9128c7921 [https://perma.cc/9KK4-EEFC].
Miguel de la Mano & Jorge Padilla, Big Tech Banking4 (Dec. 4, 2018), https://ssrn.com/abstract=3294723.
Anton Ruddenklau, Tech Giants in Financial Services, KPMG(Jan. 2018), https://assets.kpmg/content/dam/kpmg/xx/pdf/2018/02/tech-giants-in-financial-services.pdf [https://perma.cc/H43A-NCPD].
Aaron Cutler & Kevin Wyoscki, Insights: Cryptocurrency has Washington’s Attention, but Beware Overregulation, BloombergLaw (July 24, 2019), https://www.bloomberglaw.com/document/XCEI7I2S000000?bc=W1siU2VhcmNoIFJlc3VsdHMiLCIvc2VhcmNoL3Jlc3VsdHMvMjk0NmE5YjA3MDk2MjMxMTc2MDQzMTQ1YjVkNTcyYWIiXV0–b348b23c64f70855be04955b0ddc137a27853751&guid=f6e3535b-a1b3-438a-92f4-1de713c72279&search32=nXkcaSydpyrn0WNTLzitPw%3D%3DgriAfWWvxWWJ6zuuMgySxJo6z_soHsqDyRkSWy18GlnXsaJbLpKFHQ_Kf32G8B5yQpZO6qvBvXlhPUlrdd915geEIxvsIQfQZc-RpfWwAyalfurhPAg9Y_LaY2obmAvqeg24LeRtynz6At1Ag7tpaw%3D%3D [https://perma.cc/6UEA-CN5Z].
Philip Rosenstein, Facebook’s Libra Raising Unique Questions for Lawmakers, Law360 (July 22, 2019), https://www-law360-com.ezproxy.bu.edu/articles/1180635/facebook-s-libra-raising-unique-questions-for-lawmakers [https://perma.cc/2WWD-9AZN].